The so-called "nutrient neutrality" rules, which aim to limit nutrient pollution, have been criticised by developers and some Tory MPs for blocking much-needed housebuilding.

The government hopes the move, which is coming in an amendment to the forthcoming levelling up bill, will allow 100,000 new homes to be built over the next few years to 2030.

The Prime Minister Rishi Sunak said the boost to housebuilding would be "fantastic for young, first-time buyers".

Speaking on a visit to a new-build housing estate near Norwich, the PM said "previously it was a disproportionate and poorly targeted old EU ruling that blocked these homes".

The changes could boost the UK economy by £18m, he added.

The rules, introduced in 2017 when the UK was still an EU member, are designed to ensure developments do not leak nutrients into local wetlands and waterways in protected areas, affecting 62 local authorities.

They oblige developers to show they will prevent or offset that pollution in order to win planning permission - but have hindered new homes in certain areas, according to developers and the government.

The property industry will now be freed from that obligation, with the cost shifted to the taxpayer instead.

The "very small amount" of pollution from new homes will instead be offset by Natural England, such as by creating wetlands elsewhere or upgrading existing housing infrastructure.

To do so, the government is doubling existing investment to £280m by 2030.

The housing industry, which will be asked to help fund the scheme in time, has welcomed the move as a way to speed up the building of new homes.

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Stewart Baseley, executive chairman of the Home Builders Federation said house builders are "keen to play a part in protecting rivers", but the current rules are not solving the issue, rather "exacerbating another national crisis, our shortage of homes".

"New homes are a negligible contribution to the river pollution issue that is a result of agricultural practices and water company failings," he said.

The market values of listed housebuilders benefited.

Persimmon's shares closed the day almost 6% up while those of rival Barratt Developments were among others to benefit.

But the major policy shift has angered environmentalists, who say the rules don't prevent developments, they just make the "polluters pay".

They have recently ramped up campaigns against widespread water pollution, with just 14% of England's rivers in good ecological health in 2019, according to the last check by the Environment Agency.

Richard Benwell, CEO Wildlife & Countryside Link, said some developments "probably could have gone ahead faster were it not for nutrient neutrality rules."

He told Sky News: "It's not an unbreakable block on developments, just means when they go ahead, there's a clear requirement for the polluter to pay, rather than a loose guidance."

Water pollution rules are not the only issue affecting housing supply, with some calling for increased public sector investment, more land to be made available and streamlining of the planning process.

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Liberal Democrat environment spokesperson Tim Farron said: "Not content with the levels of pollution in our rivers already, scrapping nutrient neutrality is a disgraceful act from the government."

He added: "If ministers actually cared about our rivers they would clean them up rather than scrapping the few rules in place that protect them."

The Conservative government has pledged to build 300,000 new homes every year by the mid-2020s.

Parliamentary figures show housing supply has increased year-on-year from a low point of 125,000 in 2012/13, reaching a high point of 243,000 new homes in 2019/20. Supply dipped during the COVID pandemic but rose again after that.